Protecting Your Assets – How Much Risk Are You Really Taking? – A Risk In Sheep’s Clothing Part 1
When it comes to investment assets, everybody has their own definition of risk. The bottom line is that most people are just scared of losing their money–especially those in retirement who don’t have the time, desire, or in some cases, ability, to go back to work. The important thing is to understand the different types of risk that can get you. Awareness is the key here.
One of the most common types of risk is market risk. Market risk defined is “The risk that the value of your investment will decrease due to movements in the stock market”. Most people are familiar with the S&P 500, or the Dow Jones Industrial Index. These are “indexes” that, as many have experienced, can go up or down, thus increasing or decreasing your assets. One extreme example of the potential for loss in “the market” was evidenced just after September 11, 2001. The Investors Business Daily, 2001, stated that ” Since 2000, 80% of Americans have lost at least half of their investment portfolio.” Factors that affect the market include corporate scandals (remember Enron / Imclone / Adelphia just to name a few), natural disasters, mutual fund shake-ups (high fees /churning), acts of terrorism and normal, daily business activity. The key is to take advantage of the returns the market can offer without the inherent risk.